“We're looking at a very constructive setup for the fall, you know, probably one of the stronger (ones) that we've probably seen in our history,” Air Canada Chief Commercial Officer Mark Galardo told analysts.
The carrier sees less seasonality in flying than in prior years, when travel was concentrated in peak months such as summer, and as demand for corporate travel rises in the fall.
U.S. and Canadian travelers are continuing to fly internationally and splurge on airlines’ premium offerings, helping North American carriers whose balance sheets are under strain from higher labor and volatile fuel costs due to war in the Middle East.
Air Canada Chief Financial Officer John Di Bert told analysts he expects the airline’s costs to rise more slowly during the back half of the year, with unit costs set to rise 4% to 5%. Adjusted cost per available seat mile rose 6.55% during the first half of the year.
The company expects to post 2026 adjusted core profit of C$2.9 billion ($2.08 billion) to C$3.2 billion. Before the outlook suspension, it had projected C$3.35 billion to C$3.75 billion.
Analysts on average were expecting C$3.23 billion, according to data from LSEG.
Aircraft jet fuel typically accounts for about a quarter of airline operating costs, making them vulnerable to sudden spikes or swings.
Air Canada expects to offset, for the third quarter, approximately 60% of the estimated incremental jet fuel expense above its assumptions before the Iran war began in late February. This includes expected hedging gains. It expects to offset 100% of incremental fuel costs for the fourth quarter.
Fall demand outlook and share move
Air Canada said on Wednesday it is expecting one of its strongest fall seasons, helped by corporate travel, despite cost pressures that led the carrier to set its latest annual core profit target below analysts’ expectations.
Air Canada shares jumped 14% in morning trade following a deal by funds to take a minority stake in its loyalty program Aeroplan.
Canada’s largest carrier restored its annual core profit target on Tuesday, but at a lower level than its previously suspended outlook due to volatility from the U.S.-Israeli war with Iran.
Aeroplan investment and credit outlook
Air Canada announced on Tuesday that funds managed by Blackstone and three Canadian funds were making a C$2.5 billion minority equity investment in the carrier's loyalty program Aeroplan. The airline would use proceeds in part to pay off debt.
“This transaction simply further strengthens our balance sheet, creates value for all stakeholders and is an important step in our path toward investment grade rating,” CEO Michael Rousseau told analysts.
Fitch Ratings revised its rating outlook for Air Canada on Tuesday to positive from stable, citing the Aeroplan deal, and affirmed the carrier’s issuer default rating at BB.
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